Gold futures posted the biggest gain in almost two weeks on mounting speculation that China will take additional steps to spur economic growth, boosting the appeal of the precious metal as an inflation hedge.
China has more room to adjust its fiscal policy after the rate of inflation slowed in July to a 30-month low, Premier Wen Jiaboa said during a tour of Zhejiang province, according to state radio yesterday. While consumer prices have moderated, a pickup in economic growth may accelerate gains in the cost of living, according to Frank McGhee at Integrated Brokerage Services. The US dollar fell as much as 0.4 per cent against a basket of currencies, fueling demand for gold as an alternative.
“Talks about China announcing some new easing measures is providing some support to gold,” Mr McGhee said. “The weaker dollar and expectations of US announcing a stimulus package is also perking up the market.”
Gold futures for December delivery rose 0.8 per cent to settle at $US1619.20 an ounce on the Comex in New York, the biggest gain since August 3. Yesterday, prices advanced 0.3 per cent.
The precious metal surged 70 per cent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing. Bullion gained 0.8 per cent last week amid speculation that China, the US and Europe may take more steps to boost economic growth.
Silver futures for December delivery jumped 1.4 per cent to $US28.298 an ounce in New York, the biggest gain since August 3.
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